Costs, pricing, and ROI are some of the most important factors when considering a home solar installation. The total solar panel installation cost will determine how big of investment you need to make, whether you need financing, and what kind of savings you’ll get by installing solar. This guide will help you understand the variables that go into solar installation costs, find the approximate costs of solar panels for your home, and calculate the return on investment of installing solar.

Quick Answer for Most Homes: The average three bedroom home in the US will require roughly 6,000 Watts -about 20 solar panels- and this will cost between $18,000 to $22,000 before any tax credits or rebates. This is quite a range we realize. To figure out what a the solar panel installation cost would actually be for your house, you need to determine two numbers: how many watts of panels you need and how much panels cost where you are.

Solar will cost $18,000-$22,000 (without tax credits) for the average 3-bedroom home

How to Calculate the Solar Panel Installation Cost for Your Home (2 Steps)

Step 1: Calculate how many watts of solar panels your home needs

The first step is figuring out how many panels (or how big of system) you’ll need. This the hardest part of the calculation because your installation size will depend on where you live, your energy use, your roof shape/direction, and whether you want standard or premium panels.

Step 2: Determine the Price of Solar (per watt) where you live

This is the easier part of the calculation because it will be a fixed number and really won’t vary all that much between locations.

Step 1: Calculate how many watts of solar panels your home needs

Solar panel installation sizes are expressed in watts or kilowatts(1000 watts). Calculating the right system size can be challenging as different houses on the same block can have very different system size needs. Houses of the same size could also require very different installation sizes. This is because there are so many factors at play in generating the right amount of solar energy for a home. Sunshine quantity, household energy use, roof shape/orientation, and panel quality all combine to make this a tricky calculation.

Figuring these out will allow you to figure out how much solar would cost you. If you’d like a simpler and faster answer, our solar savings calculator will figure this all out for you (and connect you to multiple installers). But, for the sake of understanding where the numbers from this calculator come from, let’s explore the major variables in this calculation:

Factor #1: Sunshine Quantity

As you could have probably guessed, sunshine is a major factor in calculating solar power needs. There’s a reason why solar tends to be far more popular in California and Arizona than say rainy Western Washington State. This map by NREL (the National Renewable Energy Laboratory) gives you a sense of how much solar resource (aka how sunny it is) in various parts of the USA. Obviously, the deserts of the Southwest receive the most sun. But solar is still viable in most parts of the USA.

So how does this affect you? Your solar panel system size will be influenced by the peak sunshine hours where you live. If you want to see what your peak sunshine hours are, PVWatts is a calculator that includes this in its calculations. Peak sunshine hours is also called solar radiation and is measured in kilowatt hour per square meter per day(kWh / m2 / day)

Factor #2: Household Energy Use

The next major variables to discuss are house size and energy use. Generally, the larger the house, the more energy it will use. More energy use will require a bigger solar panel system. This can, of course, vary according to how efficient your appliances are and how much you run an air conditioner or space heater. A few appliances (like refrigerators and AC) can make up for the majority of your household energy consumption. Looking at the last 6-12 months of your utility bills will give you a sense of how much you consume over the year. Understanding your utility prices before launching into solar is key to saving money.

Factor #3: Roof Shape and Orientation

Houses, and the roofs on top of them, come in all sorts of shapes and sizes. Roof tilt/angle and orientation (north vs. south) has a large effect on how much solar energy it can produce. Solar panels generate the most energy when they are facing toward the sun. Therefore, in the northern hemisphere, south facing roofs produce the most energy. East and west-facing roofs are the next best bet.

Roof tilt is a touch more complicated than orientation. The closer the roof angle is to the latitude of your location, the better. What does this actually mean? Solar panels in New York City would ideally be tilted South at 40 degrees while panels in Miami would be tilted at 25 degrees. There is some more complexity to this in terms of ideal winter angle vs. summer angle but latitude is a good rule of thumb. The National Oceanic and Atmospheric Administration (NOAA) has a great map/calculator to explore the ideal panel angles more.

Why does this matter to someone pricing out a solar panel system? A roof that has more south facing area and the right tilt angle will generally require fewer watts of solar panels to generate the same amount of solar electricity compared to roofs that are less than ideal.

Factor #4: Panel Type

Efficiency is a measure of panel quality which describes what percentage of sunlight a panel can convert to electricity. Standard panels get 15-18% efficiency while premium panels get 18-21% efficiency. Most solar panels will have a wattage rating that serves as a proxy for its efficiency. The higher watts per panel, the more efficient the panel will be at converting sunlight into electricity.

Why does this matter or affect me? An installation that uses premium panels would cost more per watt than using standard panels but would require less space. This can be helpful if space is an issue. If space isn’t an issue, using standard panels is generally preferred.

Solar Panel Traits and Factors to Consider

Aesthetics

While earlier versions of solar panels had grey and bluish cells, these are generally considered outdated and less attractive than contemporary models. The most attractive solar panels on the market today are the all-black panels. These have black cells, black backsheets and black frame, which gives them a sleek and cohesive appearance in comparison to earlier styles and those with lighter-colored frames.

Quality of Manufacturer

While solar panels are made in several countries throughout the Americas and Europe, China makes the most panels. Through the successful production of solar panels and other complex tech such as iPhones, China has established itself in the manufactured good market and is one of the U.S.’s main trading partners in this area. Some manufacturers in China and in other nations are superior to others. The following manufacturers are considered to be premium quality by PowerScout:

Another way to assess the quality of a manufacturer is to check its certifications. For example, the International Organization for Standardization ( ISO) produces manufacturing quality assurance standards specifically for the solar panel industry. Solar panel ISO-certification is an indicator of a well-made product. If you need more help thinking through all of these factor, we have a guide to help people find the best solar panels.

Wattage and Efficiency

There are several stats to consider when evaluating solar panel wattage and efficiency. The wattage of a panel tells you the maximum watts of power it can produce under standard temperature test conditions. This is also called a nameplate rating.

Because standard test conditions do not happen most of the time, a stat called the power tolerance will let you know what percentage of variation from the nameplate rating to expect. You also need to be aware that high temperatures can reduce a solar panel’s power capacity. The measurement of this reduction is called thetemperature coefficient, usually represented as +/- x % of electricity. As you explore the brands and modules, this is another important number to check. The efficiency rating tells us how well panels convert sunlight into electricity. A panel with a higher efficiency rating can produce more kWhs of energy than a lower-efficiency panel of the same size.

However, keep in mind that high-efficiency panels are not the best choice for everyone. They can be more expensive on a per-watt basis than standard-efficiency panels. Homeowners who are not constrained for roof space can sometimes save money by passing on high-efficiency panels and using a greater number of standard-efficiency panels instead.

Another relevant trait of solar panels to be aware of is the crystalline make-up. Whether a panel is monocrystalline or polycrystalline, also known as multi-crystalline, can affect its efficiency. Monocrystalline panels are more expensive but they have a higher silicon purity and efficiency level, which benefits customer in the long run.

Warranties

During your exploration of the solar panel market, you will discover that most panels come with a product warranty and production warranty. The product warranty will cover any material defects with the panel and often extends 10 years. Some manufacturers offer 12 or 25 years.

Due to gradual changes in the panel’s chemistry, solar panels lose some electricity-production capability over time. The Production Warranty addresses this process and will cover a declining electricity production for a set amount of time. For example, in the first year, a 97 percent production is often covered and in year 25, 80 percent is commonly covered.

As you can see, solar energy system sizes will vary quite a bit according to where you live, your energy consumption, the orientation of your roof, and the type of panel you go with. Your PowerScout recommended solar installer will be the one running all of these calculations to ensure your system is perfectly tailored to your home and energy needs.

The hard part of calculating solar panel costs is now over. Now that you have a sense for how many or few watts you system will need. To calculate how much this will cost, you now need to figure out how much solar costs (per watt) where you live.

Step 2: Determine the Price of Solar (per watt) where you live

Once you know the size of the system that you need, the next step to figuring out what solar will cost per watt in your state. It’s important to always get solar prices in per watt so that you can compare across different system sizes. There is some variability in price per watt across different states. In 2017, the average cost per watt across most states is roughly $3.00-$3.70.

What Exactly Goes Into the Cost of Solar?

There are two main types of costs associated with solar panels: hard costs and soft costs. Hard costs refer the manufacturing side of the solar industry: the cost of solar panels, and other hardware like racking and inverters. Soft costs include marketing, financing, installation costs, permitting costs, and other expenses borne by the installer.

Costs of individual components

As you can see from the graph below, a minority of the costs associated with solar installations actually goes into the materials or labor. A great deal more goes into the soft costs associated with permitting, inspection, and overhead. That said, we strongly recommend considering the pros and cons of DIY solar before considering doing it yourself.

Conductors, switches, combiners and transition boxes, as well as conduit, grounding equipment, monitoring system or production meters, fuses, and breakers

Sales tax

Varies by location

Direct installation cost labor

Electrician: $19.37–$38.22 per hour Laborer: $12.64–$25.09 per hour

Varies by location and inverter option

Permitting, inspection, and interconnection (PII)

$0.10/W

Includes assumed building permitting fee of $400 and six office staff hours for building permit preparation and submission, and interconnection application preparation and submission

Sales & marketing (customer acquisition)

$0.29/W-$0.42/W (installer/integrator)

Total cost of sales and marketing activities over the last year—including marketing and advertising, sales calls, site visits, bid preparation, and contract negotiation; adjusted based on state “cost of doing business” index

Overhead (general & administrative)

$0.28/W-$0.35/W (installer/integrator)

General and administrative expenses— including fixed overhead expenses covering payroll (excluding permitting payroll), facilities, administrative, finance, legal, information technology, and other corporate functions as well as office expenses; adjusted based on state “cost of doing business” index

The type of panels you choose for your system can alter your system price considerably. If you buy long-lasting monocrystalline panels, for instance, you’ll pay $0.90 to $1.30 per watt. Polycrystalline panels, with their slightly shorter lifespan and lower efficiency, will cost around $0.60 to $0.70 per watt. Solar industry thought leader Greentech Media has estimated that the panels themselves will comprise about 27 to 34 percent of your overall system costs.

But like solar panels, different types of inverters add fferent costs. A standard single-phase string inverter costs about $0.18 per watt, while a DC power optimizer string inverter, a microchip that boosts energy production of individual panels will be more expensive at $0.30 per watt. A more sophisticated and more efficient microinverter, will add about $0.40 per watt to your system.

There are also a number of options available for racking, but price variations between these different racks is generally not significant. Racking and related costs total about $0.12 per watt.

According to Home Advisor, labor typically comprises about 15 percent of total system costs; other estimates place it as high as 19 percent of the total. These costs generally add about $0.33 per watt to your system, and only refer to the direct costs for the installer and electrician. The labor that goes into production and engineering of the solar panels and other equipment add an additional $0.21 per watt.

Then there are a variety of miscellaneous fees and soft costs associated with permitting (which adds roughly$0.10 per watt to your system), marketing and sales (which adds another $0.31 to$0.43 per watt), and general administrative expenses (which can add anywhere from $0.28 to $0.38 per watt). These costs depend on your installer and location. And adding batteries or other optional equipment will further boost your system’s cost.

How have solar prices declined over time?

In 1977, solar panels cost $76.67 per watt. But the following year, they dropped to less than $60 per watt. The year after that, they hit $40 per watt. By 1980, the panel prices had slid to just $30 per watt, and the downward trend has only continued since. Today, the average solar panel costs less than $1 per watt. The greater affordability of solar panels is one of the big reasons why it’s now cheaper than ever to go solar.

A recent report from the Solar Energy Industries Association found that from 2012 to 2017, the price of solar declined 55 percent, including a dramatic 19 percent drop between the first quarter of 2016 and the first quarter of 2017 alone.

Should I wait for solar prices to drop more?

GTM Research expects solar power to continue to drop in price by about 4.4 percent annually through 2022. The challenge with waiting for solar to drop more is that the 30% tax credit is scheduled to be phased out while the utility power prices will continue to increase. Given these two facts alone, now is the right time to go solar.

Analysts have credited the price declines to reductions in “soft costs” like marketing, labor, and system design, as well as streamlined permitting and inspection processes.

Advances in solar panel efficiency have also made solar power more affordable. Most solar panels are only 15 to 16 percent efficient, so even a small improvement in that number can lead to significant increases in average energy production. Some high-efficiency panels can now achieve efficiencies of over 21 percent.

Solar energy prices have also declined thanks to increased panel durability. Over time, solar panels produce less power. The rate at which their output declines is known as the degradation rate, and it averages about 0.8 percent per year. Newer panels, however, have consistently lower degradation rates, some as low as 0.2 percent annually. This increases the lifetime of the panels and makes them more cost-effective over the long term.

Greater demand has also pushed costs down. In 2000, the world had a cumulative installed capacity of about 4 gigawatts of solar power and the International Energy Agency (IEA) suggested in 2002 that by 2020, global installed capacity of solar energy would be about 10 gigawatts. In fact, the world has installed 227 gigawattsof solar energy by this year.

What kinds of adders will increase the price of solar?

Home solar energy systems are more than just panels and mounting systems. Before getting your system installed, it’s helpful to understand the types of costs you’ll see and the price ranges you should expect for individual components.

Possible Additional Cost: New Electrical Panel

Powering your home with solar requires a 200 Amp electrical system. While this is standard in many new homes, older homes are more likely to run on 150 or even 100 Amps. To accommodate solar, the electrical panel will need to be upgraded, typically costing $800 to $1500 (most of which is determined by your utility).

Possible Additional Cost: Ground Mounting

Whether you choose to mount your solar panels on the ground or on the roof also affects the cost of the project. Although most solar installations are rooftop, and this is the traditionally less expensive option, there are reasons to opt for ground-mounting. Ground installations are optimized for tilt and orientation, are easier to clean and maintain, and can be installed in larger arrays. If your roof is in disrepair or presents mounting challenges, the ground-mounted option may also be less expensive.

Ground-mounted panels usually have greater installation costs because they require additional materials, time, and labor. A cement foundation or reinforced pole structure is needed to prop the panels off the ground tilt them at the proper angle. Conduits between ground-mounted panels and the power meter are often run underground necessitating a trench. Trenching is labor intensive and can be expensive; costs vary depending on the length of trench, the rockiness of the earth, and the need to manage underground water.

Possible Additional Cost: Relocation of vents

A small but common problem is the presence of plumbing vent pipes that exhaust at the roof. These vents serve to equalize pressure in the drainage system building codes prevent them from being blocked by a solar panel. Luckily, relocating the vents is not an overly difficult or expensive task and many homeowners have the skills to do it themselves. For those that cannot, hiring a professional should only run several hundred dollars.

The upfront costs for a solar installation are intimidating, but it is important to remember that solar panels last 25+ years and even a few additional fees will be more than paid for in that timeframe. Before planning your solar installation, consider the factors discussed above so you’re not surprised by unexpected bills. No matter what, you are making the best long term decision for your home, your wallet, and your planet. You’ll be saving money and helping to save the environment. There are many great incentives and financing programs available for solar.

Adding it all up

Once you know the size of the system that you need, the next step to figuring out what solar will cost per watt in your state. It’s important to always get solar prices in per watt so that you can compare across different system sizes. There is some variability in price per watt across different states. In 2017, the average cost per watt across most states is roughly $3.00-$3.70.

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Estimated savings are based on a projected annual utility rate increase of 3.5% over the life of the
system. Actual pricing and savings will vary and is not guaranteed. Savings depends on several
factors, including product type, system production, system size, geography, weather, shade,
electricity usage, full utilization of all available tax credits and rebates by the system owner,
and utility rate structures and rate increases.